Silver faithful taking $5 billion hit in crossfire

Coin Sales

The slump spurred demand for physical metal, with the U.S. Mint predicting last week that its gold and silver coin sales may reach a record in 2013. The Austrian Mint sold about 2 million ounces of silver in April, compared with 8.8 million for all of 2012. Degussa Goldhandel GmbH, a precious-metal trading and investment company in Frankfurt, said silver sales last month were double the first-quarter average.

Hedge funds and other large speculators have turned bullish again after betting on lower prices as recently as mid-May, U.S. Commodity Futures Trading Commission data show. They are holding a net-long position of 1,230 futures and options, compared with a five-year average of 21,400 contracts.

Industrial demand may gain as the global economy improves, with the International Monetary Fund predicting growth of 3.3% this year and 4% in 2014, from 3.2% in 2012. About 50% of silver is used in industry, compared with 10% for gold, data from the Silver Institute and London-based World Gold Council show.

Mobile Phone

Consumption by industrial users will rise 1.7% to a three-year high of 14,625 tons this year and gain another 2.8% in 2014, Barclays Plc predicts. A car contains as much as 30 grams (1.1 ounces) and a mobile phone as much as 0.25 gram, according to Washington-based Silver Institute data.

Slowing investor demand means industry will have to absorb a bigger share of this year’s supply glut, which Barclays says will expand 8.9% to 5,512 tons. The cumulative surplus since 2009 will have reached 20,759 tons by the end of 2013, or almost 10 months of mine output, the bank predicts. Inventories monitored by Comex in New York rose 11% since the start of January, touching a 15-year high of 5,204.1 tons in April.

China, the biggest buyer after the U.S., imported the smallest amount of metal since at least 2008 in April, customs data show. The nation more than doubled mine output since 2000, according to CPM Group Inc., a New York-based research company.

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